Am I The Only One Who Thinks Fee Compression Is Hogwash?

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Q1 hedge fund letters, conference, scoops etc, Also read Lear Capital: Financial Products You Should Avoid?

Asset-Based Fee Model

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Everyone keeps saying that advisor fees are on the decline.

Hogwash!

I don’t believe this hype for a second. It’s a free country, folks. There is no reason you should have to be a victim of this trend if you know how to promote your service correctly. It’s not a robo, index fund or fee problem. It’s a sales and marketing problem easily solvable by applying creativity and taking aggressive action, which in the advisor space is rare.

It’s all just hype

Everyone keeps saying fees are on the decline, but I don’t believe it.

I don’t hear it from my clients or the hundreds of advisors I talk to every month. They’re not charging half the fee they used to charge. I don’t see any concrete evidence of it; in fact articles like this by ThinkAdvisor showed the opposite to be true in 2017.

Here’s the thing about media, journalism, and even (I hate to say it because I am one) authors: they have an agenda and they use it to get attention. Plummeting fees are a figment of the media’s imagination and pure conjecture.

Most advisors build their businesses through word of mouth so they aren’t active sellers. When they get a price objection, they don’t know how to handle it.

So they tell themselves they couldn’t make the same fees they used to because the robos are charging less. And then they tell their wives or husbands and their friends at the golf club. And then you see the retreat, the fear, the whining, and everyone feels bad so they keep saying it. Then it becomes a widespread “pity party,” and everyone else starts saying it. The media finds out and starts publishing articles because they know you’ll click and they’ll get enough traffic to charge high prices to their advertisers. Then the accounting software companies get some blogger to write about how by using their software you can earn more money, something about a magic invoice or something like that.

It becomes this whole thing about how the sky is falling, the sky is falling!

The robos aren’t really your competition

This argument that the roboadvisors are going to put pressure on fees is claptrap. As I wrote in a previous article, most roboadvisors:

  1. Aren’t going to be around for long;
  2. Don’t have a sustainable business; and
  3. Have failed to prove themselves as capable of attracting significantly high-net-worth clients.

Three strikes and you’re out!

But seriously, if you are sitting there thinking that a roboadvisor is going to take your clients away, then you are the victim of a different illness than fee compression. What you are suffering from is lack of branding. If your brand were strong enough to set you apart from other advisors, then you wouldn’t be competing with roboadvisors, the vehicle of those who don’t have enough money to require the services of a live investment advisor.

What about Vanguard or index funds? Come on, now. There are always lower cost options in any market. You could go onto Fiverr and get a freelancer to revise your LinkedIn page for $5. That’s about a 99% discount off of what I charge. But you don’t hear me crying about how I can’t send my kids to college because of that.

And why?

Knowledge of the ability to leverage the force of demand is called “selling.” Yes, I said it: selling!

Read the full article here by Sara Grillo, Advisor Perspectives

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